John Pettifred

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On November 29, 2017, John Pettifred commented on Mars: The supply of chocolate is melting away :

Though I am not a big chocolate bar fan, I enjoyed reading this article. Thanks JJ!

I agree with your recommendation that Mars’ branded products should incorporate more of its sustainability ideals. That said, I would be wary of altering the packaging too much too quickly; consumers are increasingly appreciative of sustainable practices, but a drastically different package may significantly reduce customer demand.

To further increase the number of cocoa suppliers with sustainable practices, Mars could work with the Cote d’Ivoire government to promote best practices. Given cocoa represents 30% of all exports ($3.75 billion) for the country, the government should have a vested interest in subsidizing training programs or offering tax incentives.

Furthermore, Mars should diversify away from chocolate based products, so that conforming to its sustainability standards may not result in reduced revenue. Just today, the company announced an investment in Kind, a leading snack bar provider. While Kind has some chocolate based products, the company offers bars without cocoa as well. Perhaps this minority investment in Kind is a preview for a full ownership transaction in the future.


Tabatha, thanks for putting together this article. It was interesting to see how McLaren may benefit from Brexit.

McLaren is reducing its physical distance supply chain costs, so the company can potentially afford to absorb some of the increased finished goods export tariff. That said, McLaren vehicles are very expensive such that their purchasers could be relatively price inelastic and more willing to have the tariff passed on via higher pricing. Les Edgar, the chairman of TVR (another UK-based sports car manufacturer) echoed this point, “we work in the luxury goods market, so if prices rise in the event of tariffs, well it’s not desirable but it is by no means the end of the world.”

However, if the high-end vehicle purchasers are indeed more elastic and less willing to pay for the tariff, McLaren could benefit from the non-UK luxury car providers being “priced out.” According to Research and Markets report, “A Study of the Global Luxury Car Market 2017,” the three German players, Audi, BMW and Mercedes-Benz, represent ~80% of the global luxury market. With those market leaders potentially facing higher tariffs, I appreciate DPI’s suggestion that McLaren could expand its range of models to compete in the broader luxury market, rather than just the highest end. In this scenario though, McLaren would need to be careful to not diminish its brand by producing and marketing more affordable vehicles.


On November 29, 2017, John Pettifred commented on The Cartographer and the Cloud: Isolationism’s Impact on Cloud Computing :

TOM2017, thank you for sharing a digital perspective on isolationism, as oftentimes, we just focus on traditional physical forms of commerce.

I agree with TOM2017 that Microsoft should continue to compete aggressively in international markets. In addition to the mentioned network effects, cloud computing providers tend to offer very sticky products and are able to capture additional value as their clients grow. Such can be illustrated by examining Box, a cloud content management provider that publicly discloses churn and expansion data. In its most recent earnings presentation, Box reported 4% churn and 16% net expansion, resulting in 112% net retention. Once acquired, the customers typically deploy the software for a long time and frequently require more storage and a larger contract. Such high retention tends to support a strong customer lifetime value and profitability. Box has grown internationally with “Box Zones” leveraging AWS and IBM data centers in Frankfurt, Dublin, London, Tokyo, Singapore, Sydney, Melbourne, Montreal, and Toronto. While Box needed to invest in the associated infrastructure for these many locations, the company is now cash flow positive with its product stickiness as one of the main reasons. As Microsoft likely experiences high retention as well, it would presumably also see a positive return on its data localization investments.

Furthermore, Microsoft is the most popular global office suite, and consumers and enterprises want to utilize its services. As such, governments should be incentivized to acquiesce to Microsoft’s demands, such as less stringent data localization policies. Microsoft has $138 billion of cash, cash equivalents and short-term investments, so there is plenty of accessible capital to support such lobbying efforts.


On November 28, 2017, John Pettifred commented on Ship From Store Technology Could Be Walmart’s Edge in eCommerce Battle :

Nick, thanks for putting together this interesting piece. As Kunal points out, your post provides a compelling path for a traditional retailer, such as Walmart, to grow in the digital world.

Please find below my thoughts on your questions, including reactions to Kunal’s responses.

1. If Walmart fully implements ship from store, the retailer should be conscientious that this is likely to increase store traffic and negative impact the in-store customer experience. I agree with Kunal that stores could better optimize the floor space and inventory storage by analyzing in-store and delivery demand data. Ideally, delivery orders could be processed fully in the inventory storage section to avoid in-store customers. By contrast, Whole Foods created Instacart-only lines to drive efficiency for the grocery delivery provider; however, these lines can be left empty, frustrate the in-store customers and result in crowding. While I appreciate Kunal’s suggestion of leveraging robots for product selection, this should likely be performed in the inventory storage section because consumers may be scared of the robots.

2. Traditional incumbents often struggle to attract best-in-class technology talent and pursue an acquisition strategy to effectively hire strong teams. However, over the near term, Walmart should invest to organically develop the required technology. Since acquiring in August 2016, Walmart has acquired at least six other eCommerce businesses, including Parcel, so it needs time to integrate these companies into its system; further acquisitions would add complexity. Moreover, Marc Lore, CEO of Walmart eCommerce, is an extraordinary entrepreneur; he previously founded Quidsi (acquired by Amazon) and and would be the “one person who in the new reality of retail who can stave off all of us living in ‘The Amazon’.” (Seeking Alpha) Because Lore is so well respected in the technology community, he can recruit talented technologists that Walmart (and other incumbents) would be unlikely to attract.

On November 27, 2017, John Pettifred commented on The titan of sports industry joining forces with Amazon :

Thanks TK for this thoughtful piece about Nike’s decision to sell on Amazon!

In response to your questions, the Nike-Amazon partnership is inconsistent with Nike’s direct-to-consumer strategy and likely to challenge Nike’s long-term competitive advantages and value. Selling through Amazon provides the e-commerce giant with a wealth of data and Nike with a lower margin sale. In the near term, the incremental sales will likely outweigh the lower margin, and as VK points out, Amazon is incentivized to be a collaborative partner, such that Nike is likely to serve as a strong reference for other brands. However, over the long term, Amazon’s customer data capture will hurt Nike and benefit Amazon. Without the detailed customer information, Nike is no longer truly direct-to-consumer and will be unable to efficiently produce innovative products that align well with customer interests. Moreover, Amazon may leverage this data to enter the athletic footwear and broader apparel markets. Amazon has launched many private label brands, including at least seven in clothing. A report from data analytics platform 1010data suggests Amazon can quickly become a market leader, with its AmazonBasics branded battery already representing ~1/3 of total online sales. Furthermore, Amazon can afford to sell products that compete with Nike at breakeven or a loss because of its massive scale and diversified business model (e.g., AWS); thus, Amazon could leverage the data from its Nike product sales to develop its own products and ultimately undercut Nike. Accordingly, I would recommend that Nike terminate its partnership with Amazon.

On November 26, 2017, John Pettifred commented on LEGO: Building a more sustainable future—brick by brick :

Thanks Philip for sharing the story of LEGO!

While I agree that there is a positive relationship between a company’s CSR and consumers’ reactions to the company’s products, such does not necessarily imply that CSR programs are worthwhile for that business. In “Corporate Social Responsibility and Profits: A Tradeoff or a Balance,” Thuy Tran argues that social impact initiatives (e.g., Pepsi Refresh Program) often do not support profitability. While I am not a member of the target market, I worry that LEGO’s CSR initiatives are not well known and do not drive incremental sales. For that reason, I appreciate your suggestion of LEGO educating consumers about climate change to help increase awareness of its initiatives. That said, I would still like to better understand whether toy purchasers (e.g., parents) care about CSR initiatives. For example, my siblings do not consider CSR affiliations when determining which toys to purchase for their children; accordingly, and in response to the first parting question, I would not expect LEGO to experience sufficient incremental sales to outweigh the costs from the CO2 initiatives. Furthermore, to the second parting question, if other companies see an unsuccessful CSR campaign from LEGO, they are less likely to pursue similar initiatives.